More To 4.95% Rates Than Meets The Eye

People need to consider the
hidden fees and costs attached to the attractive offers from
lenders of 4.95% pa on six month rates warns Paul Bravo,
Head of Home Loans for Sovereign Limited, New Zealand’s
largest non-bank home loan lender.

“People attracted to
the current special deals, need to consider the long term
effect. For example, the cost of refixing their home loan
in six months time, and the likelihood of having to pay a
higher interest rate then.

“Our experience has shown
that less than 2% of our customers choose the six month
term. Locking into a rate for six months is not going to
protect them from increasing rates through a complete
interest rate cycle. Our research has determined that
borrowers want the certainty that a fixed rate provides for
longer than six months,” he said.

Mr Bravo says Sovereign
believes that a medium to long-term outlook would actually
give better returns, even though the short-term rates may
seem appealing.

“These six month rates often contain fine
print of establishment fees, or application fees which make
them prohibitive for borrowers over such a short period of
time.

“When you dig deeper you find out that these loans
usually have a non-negotiable fee of around $500, and if you
want to take out another fixed rate at the end of the fixed
term you could also get charged a redocumentation fee of as
much as $300. For most people this more than offsets any
savings made from the lower interest rate. People need to
consider the complete cost of the home loan, not just the
interest rate.”

“Our research and experience supports
Sovereign’s philosophy, that is we always deliver our
customers a flexible home loan product that has no-ongoing
fees with consistently competitive and transparent interest
rates. With the abundance of ‘deals’ out there at the
moment, we’re cautioning people to watch out for short-term
pitfalls with long-term ramifications,” he
said.

Ends

Released on behalf of Sovereign by
Network Communications (ph: 09- 379 3154).

For further
information, please contact: Paul Bravo, Head of Home Loans,
Ph: (09) 487
9884.

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